22 May 2006
Australia now has a strengthened regime within the Australian therapeutic goods market including a tiered regime of criminal offences and civil penalties, higher penalties, and liability for "executive officers", following the passage of the Therapeutic Goods Amendment Act 2006. Most of the changes will come into effect on 31 May 2006, breathing new life into the powers of the Therapeutic Goods Authority ("TGA") to enforce the Therapeutic Goods Act 1989 (Cth).
What does the amendment Act mean for the industry?
The amendment Act brings into force a strengthened regime within the Australian therapeutic goods market including a tiered regime of criminal offences and civil penalties. There are limited substantive defences to the new tiered regime and this in itself is indicative of the onerous nature of the changes.
The TGA will be further empowered to issue infringement notices and accept enforceable undertakings. Other amendments include extending liability to executive officers and overseas conduct, increasing powers under warrants and expanding the TGA's power to release information.
The strengthened regime will not only affect Australian-based companies, but also foreign companies which are involved in importing, exporting, manufacturing or supplying therapeutic goods for use in Australia.
Take note: the penalties have changed with fines of up to $5.5 million for corporations and $550,000 for individuals or five years imprisonment for some contraventions.
The key amendments
The amendment Act provides that certain criminal offences will attract criminal penalties by way of a tiered regime. This will ensure that serious offences that result in, or are likely to cause, harm or injury will attract appropriate sanctions.
The distinction between criminal and civil wrongs is key to fully understanding the implications of the amendment Act. A crime consists of the act itself and the specified state of mind unless the crime is a strict liability offence which does not require proof of the mental element. The two elements of a crime must be proved beyond reasonable doubt, unlike a civil wrong which must be established on a balance of probabilities.
The new criminal regime will consist of the following offences:
The second key change is the introduction of new corresponding civil penalty provisions that will apply to certain offences. These provisions require no element of fault or aggravating circumstances. The civil penalties are primarily aimed at ensuring compliance by corporate entities. The maximum penalty in the amendment Act is $550,000 for individuals and $5.5 million for corporations.
Significantly, the amendment Act also extends liability for criminal/civil contraventions to all executive officers. "Executive officer" is broadly defined as a "director or a person who is concerned in the management of the business". This term, for the purposes of the Act, includes any executive officer who knew about an offence or contravention, or was in a position to influence the conduct of the corporation in relation to the offence/contravention and failed to take "all reasonable steps" to prevent the offence or contravention.
The maximum penalty an executive officer could face under the Act is the maximum penalty a court could impose on an individual for the relevant offence or breach committed by the body corporate. The maximum penalty for a fault based offence with an aggravating element is $440,000 and/or five years imprisonment.
Protective steps
Bearing in mind the sanctions for breach of the amendment Act, it is important for individuals and companies to consider the steps that might be taken to protect themselves or the corporation.
The extension of liability to executive officers potentially means that all those involved in day to day management may be personally liable for breaches committed by their corporation. In view of the above test, an individual who fails to take "all reasonable steps" to prevent an offence may be liable. Corporations should therefore ensure that their "executive officers" are aware of their obligations under the amendment Act. Developing a guidance note or policy could be an effective way to communicate the relevant messages.
Corporations should also take care to ensure the accuracy of information/statements they provide to the TGA. Providing false or misleading information to the TGA is currently an offence, but the penalties will increase once the amendment Act commences. Written communications should be closely monitored and appropriate individuals briefed about the implications of providing false or inaccurate information.
Looking forward
A media release on 11 May 2006 by ANZTPA confirmed that the second half of 2007 will also see the birth of the new joint Australian-New Zealand regulatory agency, the Australia-New Zealand Therapeutics Product Authority ("ANZTPA"). ANZTPA will be responsible for regulating the quality, efficacy, safety and performance of therapeutic products in both countries. Together, the amendment Act and ANZTPA will exist with the aim to prevent a major product scare in either Australia or New Zealand or both in the future.
The amendment Act gives the TGA more power to prevent non-compliance with the Therapeutic Goods Act. This strengthened regime should be transferred to ANZTPA but it is currently unclear how and when this will happen. We will monitor this issue and report on developments as they occur.
